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credit from Bank South, which provided funds to acquire Norcom
and a line of credit for working capital. Mr. Arnold personally
guaranteed the Bank South loan. Additionally, Messrs. Arnold and
Lombardi each lent small amounts of cash to ICHC to help NCAC
acquire Norcom.
The loan agreement with Bank South included numerous
restrictions on Norcom’s activities, two of which are relevant to
this case. First, the loan agreement prohibited Norcom from
declaring distributions without the bank’s approval. Second, the
aggregate amount of compensation Norcom could pay to its officers
and directors was restricted to 110 percent of the prior year’s
total. In early 1990, Norcom requested and was granted a waiver
of these restrictions for Norcom’s fiscal year that ended on
January 31, 1990. Norcom requested a waiver of the restriction
on distributions because it had declared a $1.6 million dividend
in August 1989. At least a portion of the dividend was requested
by Bank South so that another member of the affiliated group,
RDI, could pay off a loan from Bank South, which RDI did not have
the ability to pay. This was the only dividend Norcom declared
from 1987 through the end of 1996.
In February 1991, LaSalle National Bank replaced Bank South
as Norcom’s primary lender. LaSalle provided Norcom with an
extension of credit in the amount of $23.5 million. Mr. Arnold
personally guaranteed at least $2 million of this debt. Like the
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